*1 MONTANA al. v. UNITED STATES et Argued
No. 77-1134. February December 1978 Decided *2 J., opinion delivered Court, which MARSHALL, Burger, J., C. and Brennan, Stewart, Blacicmun, Powell, and Rehnquist, JJ., joined. Rehnquist, J., concurring statement, post, Stevens, filed a p. J., dissenting post, opinion, p. 164. filed a White, Poore,
Robert A. Special Attorney Assistant General argued the appellants. cause for him With on the Montana, Terry Cosgrove, Special brief were B. Attorney Assistant Gen- and Robert W. eral, Corcoran. argued
Stuart A. Smith the cause for the United States. him With on the brief were Solicitor McCree, General Assist Attorney Ferguson, ant General English and David Carmack.* urging * Briefs of amici curiae reversal were Lejkowitz, filed Louis J. opinion delivered the Court. Mr. Justice Marshall receipts imposes percent a one State private, construction upon public, but contractors Attorney General, Toch, General, Francis V. Ruth Kessler Solicitor Dow, Attorney General, York; by Assistant for the Slade State of New Oorton, Attorney Attorney General, Holmquist, Richard H. Assistant Senior Greg General, General, Montgomery, Attorney for the State of Assistant Washington; Attorneys for their General and other officials respective jurisdictions Attorney Coleman, as follows: J. Marshall General Virginia, Attorney General; and John MacConnell, G. John Assistant MacPherson, Lasota, Acting Attorney A. Arizona, A. General of and Ian Attorney General; Olson, Attorney Assistant Allen I. of North General *3 Dakota, Jakes, Special Attorney General; and Kenneth Avrum Assistant Gross, M. Attorney Joseph Donohue, Alaska, of General and K. Assist Attorney ant General; Nebraska, Douglas, Attorney Paul L. of General Ralph Gillan, and Attorney General; Burch, H. Assistant Frank B. At torney Maryland, Attorney General of Langbaum, and Gerald Assistant General; Amemiya, Y. Attorney Ronald Bruce Hawaii, General of and T. Honda, Deputy Attorney General; Attorney List, Robert of General Nevada, Thompson, and James H. Deputy Attorney General; Chief James Redden, A. Attorney Oregon; General Baxley, Attorney of William J. Alabama, General of Jr.; and Herbert Rooney, I. Burson, Acting John J. Attorney Wyoming, General Douglass, of and James D. Senior Assistant Attorney General; Philip Jacobsen, H. Acting Attorney Guam; of General Gorton, Slade Attorney of Washington, General and Richard H. Holm- quist, Senior Attorney Assistant General; Clinton, Attorney Bill General Arkansas, of and Nevrla, Martin J. Attorney General; Assistant Robert L. Shevin, Attorney Florida, General of Broome, and Maxie Assistant Attor ney General; Chauncey Browning, Attorney Jr., H. General West Vir ginia, and J. Steele, Jr., Thomas Attorney General; Assistant Richard C. Turner, Attorney Iowa, George General of Murray, Attorney Assistant General; Wayne Kidwell, Attorney L. Idaho, General of and Theodore V. Jr.; Spangler, Toney Anaya, Attorney Mexico, General of New and Jan Unna, Assistant Attorney General; Sendak, Theodore Attorney L. General of Indiana, and Bogará; Miguel Donald Gimenez-Munoz, Attorney Gen eral Rico, of Puerto and Victor Ojeda; Cruz Kelley, Frank J. Attorney General of Michigan; and J. D. MacFarlane, Attorney General Colo rado, and Steven Kaplan, Attorney Assistant General. 1977).1 Ann. (Supp. §84-3505 Codes Mont. Rev. projects. may tax gross receipts credit contractor public A personal property, corporate income, payments receipts lia Any remaining gross income taxes.2 individual customarily passed on form increased bility is governmental financing to the unit costs construction appeal prior judgment At issue this whether project.3 upholding precludes the Montana if constitutionality from contesting its the United States (Supp. 1977), provides (5), Mont. Codes Ann. Section 84-3505 Rev. part: fee public pay shall to the an additional license “each contractor public equal (1%) receipts per cent a sum to one . . year which the license is issued . during income contracts for public Act to include: defines contractors any “(1) proposal person . who submits a to or enters a contract . . into performing public all construction work in the state with the for Montana, any board, depart- government, commission, with or state of or any county any city thereof or with board of commissioners or with ment any public board, commission, or body, council ... or with or town other any agency authorized to let or award contracts work when cost, price value, $1,000. or contract thereof exceeds the sum of “(2) undertaking perform . . . subcontractors the work covered cost, part thereof, value, original price or contract contract $1,000.” (Supp. 1977). sum of which exceeds the §84-3501 *4 receipts encompass: Gross receipts state, of
“all from sources within the whether in the form money, credits, in, engaging consideration, from, or other valuable received conducting business, or a deduction account of without on the cost sold, used, property cost, the the cost of materials labor or service interest any 'gross taxes, expense However, paid, losses, or other whatsoever. receipts’ shall include cash discounts allowed and taken on sales refunds, by credit, either in cash or written off sales uncollectible accounts time, payments liquidation time to received final of accounts receipts previous person.” included in the return made the 84-3501 § 1977). (Supp. and 84-3514 See §§ App. 98-108, 112-117, See not, whether the tax discriminates the Federal Gov ernment in Supremacy violation the Clause.
In 1971, Peter Kiewit Co., Sons’ contractor a federal dam project in Montana, brought suit state court contend- ing that the Montana gross receipts unconstitutionally discriminated against the United and the companies States with it which dealt. The litigation was directed and financed by the United States. Less than month after the state suit was filed, challenge Government initiated this to the constitutionality of the tax in the United States District Court for District stipulation by Montana. On parties, instant case was continued pending resolution of the state-court litigation.
That concluded in a unanimous decision Supreme Montana Court the tax. Peter Kiewit sustaining Sons’ Co. v. State Board Equalization, 161 Mont. P. (1973) (Kiewit I). 2d 102 court found the distinc tion between and private contractors consistent with the mandates of the Supremacy Equal Protection Clauses. Id., at 505 P. 149-154, 2d, at 108-110. The contractor subse quently filed notice of appeal to this but abandoned Court, request for review at the direction of the Solicitor General. App. Juris. Statement 86-87. then It instituted a second seeking action state court a refund certain tax payments different from those involved in Kiewit I. determining On legal was, contractor’s second claim in all material respects, identical to its first,
invoked the judicata doctrines collateral estoppel res to affirm complaint. the dismissal of the Peter Kiewit Sons’ Co. Department Revenue, 166 Mont. 531 P. 2d (1975) (Kiewit II). II,
After the decision Kiewit three-judge District Court the instant heard case on the In merits. a divided opinion, court concluded that was not United States bound *5 down the as viola- and struck decision, (1977). Supp. Supremacy Clause. F. tive of the Supremacy premise majority began with the from only not immunizes the Federal Government Clause from indirect taxation but also States, direct taxation discriminate the Government operates Id., 359. See whom transacts business. those with it Detroit, Phillips (1958); United 355 U. S. States Dist., Independent v. Dumas School 361 U. S. Chemical Co. subject private no contractors were (1960). Because gross receipts the court reasoned that tax, to the Montana impermissibly singled out the Federal Govern- the statute disparate with whom it dealt for treatment. ment those municipal well as applied the tax to state and as That majority’s view, negate not, federal contractors did discriminatory although For con- the statute’s character. projects pass on the amount might tractors construc- liability higher to the in the form of their tax State recoup expenditure would its additional costs, tion contrast, generated. By through the revenue that the tax when federal contractors shifted the burden their increased such States, offsetting costs to the United it would receive no Accordingly, revenues. the court concluded that the statute upon immunity discriminatory encroached from taxation enjoyed by Supremacy the Federal Government under F. Supp., judge argued Clause. 437 at 358-359. One chal- estopped dissent both that the United States was lenging constitutionality statutory of the tax scheme, encompassed receipts municipal because it discriminatory contractors, state as well as federal was within In- meaning Phillips Chemical Co. v. Dumas Dist., dependent supra. School 437 F. at 365-366 Supp., (Kilkenny, J., dissenting). probable jurisdiction. noted
We S. 916 U. we find question presented by Because that the constitutional
153 appeal this was determined adversely United States prior in a proceeding, we on grounds reverse of collateral estoppel without reaching the merits.
II A fundamental precept of adjudication, common-law em bodied in the related doctrines estoppel and res collateral judicata, is “right, question put a or distinctly fact and directly issue by competent determined juris court of diction .. . disputed cannot be in a suit subsequent between parties the same or privies their . R. . . Southern Pacific States, Co. v. United 1, 168 U. S. 48-49 Under res (1897). judicata, final judgment on merits bars further claims by parties privies or their based on the cause action. same Cromwell v. County Sac, 94 351, (1877); S. 352 Lawlor U. v. National Screen Service Corp., (1955); 349 U. 326 322, S. 1B J. Moore, Federal (2d Practice pp. 0.405 621-624 1], ¶ [ (hereinafter 1974) IB Moore); ed. (Second) Restatement Judgments (Tent. 47 ; § Mar. 1, 1973) No. 28, (merger) Draft id., §48 (bar). Under collateral once an issue estoppel, actually and necessarily determined aby competent court jurisdiction, that determination is subsequent conclusive in suits based on a different cause of involving party action prior litigation. Shore, Hosiery Parklane Co. v. S.U. 322, (1979); n. 5 Scott, Estoppel Judgment, Collateral L. Harv. Rev. (1942); (Second) of Restatement Judgments (Tent. 1977) § 68 Draft 4, Apr. (issue pre No. clusion) . Application of pur both doctrines central to pose for which civil courts established, have been the conclu sive of disputes resolution within their jurisdictions. Southern Co., R. supra, at Hart Supply Steel Co. v. Railroad 49; Pacific Co., 244 U. S. preclude parties To from con testing matters they have had a opportunity full fair to litigate protects their expense adversaries from the and vex ation attending multiple judicial lawsuits, resources, conserves minimizing possi judicial action reliance on fosters decisions.4 bility of inconsistent nonparties implicated when similarly interests are These direct they which have a over litigation control assume redetermine seek to interest and then proprietary financial observed As this Court previously resolved.5 issues Souf- Sucreries, 475, 486-487 des S.U. Compagine front *7 direction at whose persons for whose benefit and (1910), the “strangers to be litigated cannot be said of action is cause suit in who or defends a prosecutes ... to the cause. [0]ne right, his protect to establish and own name of another in action aid in or defense of an prosecution assists who as he much bound ... of his own ... is as of some interest record.” See Schnell party if had been to the be he would Sons, Inc., (1961); 4 260, & 365 U. 262 n. v. Peter Eckrich S. Research, Inc., Hazeltine U. S. Corp. Zenith v. 395 cf. Radio under nonparties such falls (1969). 111 Preclusion of 100, judicata estoppel rather than res rubric of collateral identity causes presupposes between because the latter doctrine nonparty has And the cause action which a action. he vicariously by definition from that which asserted differs his & C. subsequently litigate right. to in own See G. seeks Saalfield, (1916); Co. 29 Restatement Merriam 241 U. S. 22, 83, b, Draft (Tent. 51 (Second) Judgments p. Comment § 4 Judicata, 1036, Hazard, 44 Cal. L. See Res Nova Res S. Rev. Adjudi (1971); Vestal, Judicata Variables: Preclusion/Res Bodies, 857, cating (1966); Note, Developments J. 54 Geo. L. 858 Judicata, 818, Law—Res Harv. L. Rev. 5Although “privies” term has on to been used occasion denominate g., e. G. & C. Co. v. Saal litigation, Merriam nonparties see, who control 22, (1916); Judgments §83, 241 U. S. Restatement of Comment field. usage conclusory (1942), analytically this has been criticized as [6], p. 1553; Note, Rev., unsound. IB Moore cf. 65 Harv. L. ¶0.411 applicable 856. The nomenclature has been abandoned in the section of (Second) the Second Edition of Restatement. See Restatement Judgments (Tent. 15, 1975). Draft Apr. No. § Apr. No. IB 15, 1975); pp. Moore 0.411 [6], 1553-1554; ¶ Developments Note, Law—Res Harv. L. Judicata, Rev. 862 (1952).
That the United States exercised control over the Kiewit dispute. stipulated The Government has it:
(1) required the to filed; lawsuit be (2) reviewed approved the complaint; (3) paid attorneys’ costs; fees and (4) directed the District Court appeal State Supreme Court; Montana (5) appeared and submitted a brief amicus in as Court; (6) directed the of appeal a notice filing this Court; and
(7) effectuated Kiewit’s abandonment of that appeal advice the Solicitor App. General. Juris. State- ment 86-87.
Thus, although not a party, plainly the United States had sufficient oar” in “laboring the the conduct state-court litigation to actuate principles estoppel. Drummond v. States, United U. S. See Schnell v. Sons, Peter Eckrich Inc., & supra, at 262 n. 4; v. Souffront Compagnie des Sucreries, supra, 486-487; Watts Swiss Corp., Bank 2d 270, N. Y. 277-278, N. E. 2d 739, 743-744 (1970).
Ill To determine appropriate the application of es- collateral toppel the instant case necessitates three inquiries: further whether first, the presented by issues this are in substance the; the same as those against resolved United I; States second, whether legal controlling facts principles have changed significantly the since state-court judgment; and finally, whether special other circumstances an exception warrant to the rules of preclusion. normal
A doubt that dispels the record Kiewit A review of Supreme Court plaintiff there raised and the Montana the claim that United precise the constitutional the there decided I, In in Kiewit the con complaint here. its advances States gross receipts accompanying tax and alleged tractor the inter because alia: regulations they, were unconstitutional Plaintiff, “(a) illegally discriminate and agencies instrumentalities, and States, United and business, does those with whom United States deny protection of equal due process them law laws; “(b) on Plaintiff which is illegally impose upon subjects; uniform the same class of improperly the Federal “(c) illegally and interfere with power Government’s contractors schedule select policy construction and . . . conflict with Federal law and regulating procurement; Federal immunity “(d) illegally violate the of the Federal Gov- ernment and its (including Plaintiff) instruments control in performance their functions; [and] “(f) illegally policy selecting frustrate Federal . . possible App. bidder . lowest theory rejected those contentions that: government being
“The
treated
the same
manner as
state of Montana treats itself and its sub-
*9
or
municipalities.
only
divisions
discrimination
can
government
private
federal
claim that
contractors
paying
are
How-
the same tax as
contractors.
Dumas
ever, according
[Phillips
Chemical Co. v.
Dist.,
and
Lake
(1960),
School
No in different this challenge constitutional is at issue litigation. Indeed, complaint the United amended States' tracks almost in plaintiff’s verbatim language of the I in alleging provisions: the Montana tax illegally
“(1) United plaintiff, discriminate States, its and and those agencies instrumentalities, and with whom the in violation United States does business Supremacy and Article Clause, VI, Clause Fourteenth Amendment;
“(2) illegally and impose plaintiff’s a tax contractors subcontractors which is class upon not uniform the same subjects in Amendment; violation of the Fourteenth “(3) illegally pay force the United States of America more its private construction party than does a corporation Supremacy Clause, violation of Art. Cl. VI, 2; [and] .
“(5) . illegally . Govern- with the Federal interfere] ment’s free choice to choose contractors and frustrate] policy of choosing the lowest bidder violation procurement Supremacy Clause, law Art. and [sic], IV 2.” App.67. Cl.
Thus,
“question expressly
definitely
presented
this suit is
definitely
litigated
the same as that
actually
adjudged”
adversely
court.
Government
Moser,
United States U.
Absent
S.
significant changes in controlling
legal principles
facts or
*10
I,
the Montana
special circumstances,
Kiewit
other
since
conclusive here.
of these issues is
Supreme Court’s resolution
B
Sunnen,
(1948),
all credits contractors are still gross revenue percent, App. one-half of one to Juris. *11 Statement 90, the Government submits the factual premise I holding of the Kiewit is absent here. It disagree.7 is, in course, changes
We
true that
facts
a judgment
essential
to
will
estoppel
inap
render collateral
plicable
subsequent
in a
action raising
See,
the same issues.
e. g., United
v. Certain
Irving
States
Land
Place
16th
at
&
Street,
F.
265,
(CA2
2d
1969);
v. Commis
Metcalf
sioner,
at property tax for income and with credits available receipts, to remove sought payments, Legislature the Montana the location dissemble about for contractors incentive Under revenues. and the source of taxable equipment taxable a substantial paid who statutory scheme, a contractor claiming those might, or income taxes property amount receipts gross his effectively cancel out payments credits, as In Id., practice, 105. liability. 2d, 505 P. at at in total I, had not resulted in Kiewit court noted the statute part because receipts payments, offset 1% Ibid., P. as contracts. provisions such those rely on did not Significantly, the court 2d, however, *12 analysis its of liability in Kiewit’s potential the absence of tax to it did not even allude Indeed, challenge. constitutional Id., potential the in course of that discussion. washout the 2d, at It focused rather the 147-154, 505 P. at 106-110. rationality public private between classification and on the treatment contractors, parity of between the Ibid. and other contractors. United States potential conclusion that the washout the tax was Our controlling in Kiewit further reinforced significance in II. holding the Montana Kiewit Court’s There, the contractor that its lia- alleged receipts tax credits, had bility property exceeded and income tax only for in argued that “the basis” the decision Kiewit was “if a properly the Act were enforced would in it result ” II, 262, Kiewit P. 1328. Mont., 2d, ‘washout.’ 166 at 531 at rejected Supreme Court Kiewit The Montana reading I as “much too P. at Mont., 2d, at narro[w].” possibility That the had offset not materialized in the view, Kiewit court’s a fact too was, “inconsequential” to relitigation Id., constitutionality. warrant the statute’s problem Apparently had appreciable the not arisen to extent with private Arg. contractors. Tr. of Oral 5-6. 2d, here,
at 531 P. at 1329. too we cannot So view absence of total washout facts essential to altering a as in Kiewit I. judgment
Thus, major changes there the law unless have been I, governing intergovernmental tax immunity since Sunnen, the Government’s reliance on Commissioner Sunnen involved the tax S. (1948), U. misplaced. status of generated by agreement certain income a license during particular period. Although previous had agreement settled the status of income from the same during earlier tax declined years, give to collateral estoppel prior judgment effect because there had been Id., significant “change in legal climate.” at 606: Un- derlying the Sunnen decision was a concern that modifications id., legal could render a “controlling principles,” previous prevailing doctrine, determination inconsistent with and that such a is then each perpetuated suc-
“[i]f determination ceeding year taxpayer original as involved he litigation, is accorded a tax treatment different given taxpayers other class. As same administration result, there are inequalities discriminatory revenue laws, liability, in tax distinctions litigious and a fertile basis for confusion. [Collateral *13 not estoppel] is create in decisions rights meant to vested thereby that have become or time, obsolete erroneous with Ibid, inequities causing taxpayers.” (citations among omitted).
No such considerations here. The does obtain Government did that a change contend and the District not find in principles had occurred between Kiewit legal controlling and the suit. amended com- instant That the Government’s plaint legal in replicates argument this action in substance the Kiewit complaint advanced the contractor’s in further major suggests the absence of doctrinal shifts since the Court’s decision.9 Because the factual in legal context which the issues materially I, this arise case has not altered since preclusion rules of operate parties normal should to relieve question the identical of the “redundant [over] statute’s application to the status.” West taxpayer’s Tait v. Maryland Co., ern R. 620, (1933). U. See United S. Co., States Mfg. 1965). v. Russel (CA2 349 F. 2d 18-19
C The sole remaining question particular whether circumstances this an justify exception case to general principles estoppel. possible exception Of relevance is which for obtains in questions “unmixed successive law” actions involving substantially unrelated claims. United Moser, States v. recognized U. S. weAs in Moser:
“Where, a court in example, deciding case a has enunciated rule of parties in law, subsequent action upon demand estopped are not different insisting the law is otherwise, merely because the parties are the fact, same both cases. question But a or right distinctly adjudged original action cannot be disputed a subsequent action, though even determination upon was reached an erroneous view Ibid, an application erroneous (emphasis law.” added).
Thus, when issues of law
arise
successive actions involving
unrelated subject
preclusion
matter,
may be inappropriate.
See Restatement
(Second) of Judgments
68.1, Reporter’s
§
Note, pp.
(Tent.
Draft No. 4, Apr.
1977); IB Moore
p. 4235;
¶ 0.448,
Scott,
Finally, the Government has not unfairness alleged inadequacy in procedures voluntarily the state to which it ground distinguish England The Government seeks to technically abstain, rather, parties’ request, court below did not but at the “pending the continued the action resolution in the state courts of Montana.” view, App. Further, to Juris. Statement 49-50. Government’s England only -party freely arises rule when a submits his federal claims *15 164 full it had therefore that must conclude We
submitted.11 challenges constitutional its opportunity press to and fair estopped from is the Government Accordingly, I. Kiewit of issues here. contrary resolution those seeking is the Court judgment District
Reversed. concurring. Rehnquist, Mr. Justice understanding customary I on join opinion Court’s finally or to drafts references law review articles and its Judgments not are adopted Restatement of versions expressed therein on bind the to the intended to views by facts of this case. presented issues not dissenting. White, Mr. Justice estopped litigating I was Government disagree in the its claim in federal court virtue of the earlier action I And on merits think the courts of Montana. constitutionally Thus, is infirm. would gross receipts tax affirm the below. decision adjudication States was not
to in state courts. Because United party I, it is bound the Government submits that judgment in that case. Brief for United States 34. agree properly as the District Court’s action is characterized
We judicata, England, is and that res the doctrine involved in a continuance supra, point inapplicable nonparties. But See at 154-155. neither availing dispose grounds estoppel, here of the case on of collateral since we nonparties, ibid., England apply which simply does see invoke dispel any inference that the same result obtain if the would Federal had been forced into state court and had reserved Government claim. if Redetermination issues warranted there is reason to doubt the quality, procedures extensiveness, prior litigation. fairness followed in (Second) Judgments (c) (Tent. 4, 68.1 Draft See Restatement No. § 1977); Note, Judgements Effect Apr. 15, The Preclusive of State Subsequent Actions, 78 Colum. L. Rev. Cf. 640-653 (1973); Berryhill, 411 Hernandez, Gibson U. S. Trainor v. v. 469-470, (1977) (Stevens, J., dissenting). and n. U. S. estoppel It is "must be principle basic that the collateral in the second confined to situations where the matter raised first respects suit is in all with that decided identical un- proceeding and . . . remain controlling where facts Sunnen, changed.” Commissioner 333 U. S.
(1948). The but maintains that dispute this, Court does not *16 discrepancies underlying in the federal the facts state and actions were of no moment. It that the clear, however, tax Supreme Court in Kiewit the assumed that scrutiny under was a rather revenue- tax-enforcing, than a in significance supposition, of collecting, measure. The that by I nor my in view, by opinion is refuted neither the Kiewit II. Kiewit subsequent pronouncements the state court’s in That the assumption lost its force the time of the By undisputed. then the Federal Government whom policy had abandoned its contractors with requiring receipts dealt the forgo gross it to credits available under Though law. them- accordingly federal contractors availed “the law, of the credits under selves and refunds allowable the . . . evidence this case establishes that uncontroverted revenue subject federal contractors are a gross still to [net] Ante, Because percent.” tax one-half one at 158-159. con- facts developed three-judge before the court cast court wholly issues think the light, stitutional a different proceeded to decide those issues uninhibited properly prior adjudication. I,
At in Kiewit the Montana the outset of discussion receipts that Court labored to demonstrate funds col- tax-enforcing tax in issue was a in that measure, pursuant credited, against would be applied, lected thereto had The court understood the tax taxes otherwise due. practice gross receipts resulted in total washout but this to Federal Government’s payments, it attributed prohibiting certain contractors —such as the policy Kiewit Co. under the and credits available taking refunds itself'—from provi- to, and indifference credit of, law, ignorance and to maintained contractors. The court part sions on the of other was intended aberrations, such the Act aside from that, measure.” Peter enforcing revenue “operate as and would Equalization, Mont. Co. Board Kiewit Sons’ v. State added). (1973) (emphasis P. 2d extensive court’s majority The surmises the state court’s of the was irrelevant to the characterization analysis. relegates But that view dicta constitutional operation impact appraisal state court’s careful analysis By inspecting court’s constitutional the tax. the state nature of the independently evaluation of the of that court’s adjudication majority that the constitutional assumes tax, vacuo. proceeded of the state court’s decision logic say may revenue-raising well measure. But to extend I may that persuasive authority on that score is be adjudicated not to establish it has the issue. Kiewit II
Moreover, the Court’s reliance on to demonstrate immateriality of the “washout” nature of the tax to *17 I Kiewit in I misplaced. recognize decision regarded Kiewit’s second attack— launched after the contractual credit restrictions were removed the Government —as foreclosed in the judgment in objection appli- first suit. But Kiewit’s addressing of revenue, cation the tax a manner to raise the court may acknowledged that “it be that Kiewit would be entitled Peter remedy.” a refund or some other administrative Revenue, Department Kiewit Sons’ Co. 260, 166 Mont. of 531 2d 1327, P. The of statute, course, contemplates remedy, no such nor did court affirmatively it to authorize one.1 Yet construe the court’s remark leaves The Administrator the Miscellaneous Tax Division of the Montana Department proceedings of Revenue testified in that no remedy contemplated. existed and administrative that none was Deposi Madison, 68, p. tion of James Record Doc. No. whether,
unclear absent such remedy, the court would persist in holding the tax constitutional. The statement underscores the court’s assumption gross Kiewit that the receipts tax was a tax-enforcing correla- suggests device and tively that imposition decision there did condone not unmitigated an positive solely on public contractors.2 tax majority II inferring unsound in that the Kiewit ruling then-presumed was insensitive to the “washout” gross receipts character of the tax.
IAs see it, then, signifi- there “modification of the was a cant facts” that prior rendered the state “determination obsolete ... least for purposes,” future Commissioner v. Sunnen, supra, at the Government 599; and was free to litigate its constitutional challenge federal court.
II On the merits, below should be judgment sustained. There is nothing wrong, course, receipts with a general applicability incidentally applies con- tractors who deal with increasing the Federal Government thus Fresno, its construction costs. United County States v. Co., 429 U. S. (1977); Contracting James v. Dravo directly U. S. 160 (1937). long as the tax is “So laid on the Federal it is valid if Government, nondiscrimina- tory ... Congress until declares otherwise.” United Fresno, County supra, States v. at 460. Fresno,
In we stressed be requirement the state tax “imposed equally on similarly the other constituents situated of the State.” S.,U. at 462. concern for discrim- Such
2It is true that the court opinion indicated that its first that there held grounds were reasonable distinguishing private between *18 purposes. contractors for tax But differentiating private the discussion public contractors to which the court alluded was addressed to equal claim, Kiewit’s protection supremacy not claim. See Peter Kiewit Sons’ Equalization, 146-151, Co. State Board v. 161 Mont. P. 2d inatory original of M‘Culloch taxation “returns to the intent Id., Maryland[, (1819)].” at 462-463. We Wheat. observed that check abuse of political against “[t]he taxing power present found in M‘Culloch ... where lacking con- imposes nondiscriminatory only on its State artificially stituents their and M‘Culloch entities; owned exempt private foresaw the in forcing unfairness State to individuals with from property beneficial interests in federal imposed private taxes in on similar held others interests property.” Ibid.
The application Montana receipts tax cannot survive the foregoing embrac- principles. It law generally ing similarly all business doing situated constituents in the private collection public mandating sectors. While of revenue entities, public contractors with who transact passes law private over deal with all contractors who parties. Thus, “political been check” that would have provided by private-sector “against contractors abuse power taxing lacking.” Ibid. [is] Appellants private maintain that contractors who deal with enterprises are similarly not situated those transact who with They point bodies. special problems associated with enforcement of against prone state tax laws contractors to move about the in pursuit large public State contracts. The gross receipts tax measure it is necessary, argued, was order to facilitate enforcement of other tax such laws contractors. Concededly, however, problems the same exist with respect to large private assuming and even contractors; that differentiation public-sector private-sector between contractors is warranted the context of tax enforcement measures, appellants’ provide representations no basis regard discriminating raising. to revenue in the equal protection defended the classification for purposes submitting that public’s safety stake of building
projects, and hence in qualifications public contractors, treating public-sector differently warranted from contractors private-sector their counterparts. these considerations, But like the by explain why matters advanced appellants, fail to tax collected from the former but not the latter.3 More- over, though may equal the law be sustainable an protection assault, indulgent standard used in that area will not be applied supremacy when federal is threatened. Phillips Dist., See Chemical Independent Co. v. Dumas School dispar- U. In circumstances, S. such justified significant ate treatment “must be differences be- tween classes”; the two pro- there must be “considerations vid[ing] support for Id., solid the classification.” at 383-384 (emphasis added). It plain, private-sector seems that then, public-sector similarly pur- contractors are for situated poses of litigation. this
Ill Appellants enough that contend, nonetheless, it that the tax reaches with dealing public contractors all entities —state or federal. Appellants root their contention Court’s this in Phillips Independent statement Chemical Dumas Co. Dist., School supra, who that must “treat those State deal with the Government as well as with it treats those whom it (Emphasis deals added.) Phillips fur- But itself.” no support appellants’ nishes position. There, held unconstitutional state tax scheme that treated lessees public suggested court special treat contractors warrant projects extensively ment because construction regulated are more private jobs subject mandatory than supervision inspection. and are or stipulated But State has subject no “federal contracts [are] standards, supervision, state any right review or nor have [does State] authority suspend any license, federal contractor’s nor can the interfere with selection of [State] bidders for the Federal Government.” App. to Juris. Statement Thus, posited the considerations state distinguish private-sector court do contractors those who deal with the Federal Government. severely than property prop- more lessees
of federal issue, however, the Court erty. addressing Even before discrimination between the there was “no ascertained that *20 private property.” Government’s lessees and lessees of S., Thus, concern for Phillips at 381. the Court evinced U. similarly all connected equal persons treatment of situated just persons private public sector, with both the and not the public within sector. event,
In
see no basis whatsoever for
from
extracting
principle
may
that
favor itself over the
a State
not
proposition
may
Federal Government
further
that a State
private-sector
favor its
constituents
so
as contractors
long
public
working
Indeed,
are taxed.
Fresno
bodies
only
Court sustained the
persons
tax
after
itself that
assuring
property
who rented federal
were
off
“no worse
under Califor
nia tax laws
private employers
than those who work for
and
rent
private
houses
sector.” 429
at
U.
465. Such
S.,
laws, reaching broadly
public
private
sectors,
across
are characteristic
g.,
of those this Court has sustained. E.
Detroit,
v.
United States
(1958);
There good reason “imposed to insist that a state tax be equally” “similarly on all situated State,” constituents of the S., County Fresno, United States v. 429 U. whether public connected with the private. sector or applica- Broad necessary tion of a tax is guarantee “political an efficacious potentially check” on abusive taxation. The Montana receipts limited as public-sector it is to tax, contractors, pro- vides little such assurance. Taxation dealing of contractors directly with the State state agencies safeguard affords no against discriminatory treatment of federal contracting agen- cies and the contractors they with whom Any deal. tax passed along by fully
increase a contractor would be borne corresponding but would be offset agency State; in the State’s revenues case perspective the tax washout.
Municipalities enjoy districts, true, local it is do they may the same advantage, and resist tax increases if would, successfully burden them and the Federal enforced, potentially, Government alike. local subdivi- But, at least may sions offsetting by indirection,4 secure state assistance may oppose diminish their tax hikes. incentive to an assuming, however, Even local bodies share interest with the in restraining taxes, Federal Government it escapes why me acquiesce Government must they protection limited provide political when an enhanced *21 check would ensue from similarly extension of the tax to other situated state constituents. indicated, As have there is no support for such a notion this Court. decisions of McCulloch, itself, private condoned state taxation of interests property property “in common with other same description throughout Mary- the State.’’ McCulloch v. land, 4 Wheat. 436 (1819) (emphasis added). And in Fresno we observed that escalation of a state tax so as de- to stroy or impair might federal function be im- forestalled position of the tax “on the income and property interests of all other residents and voters of the State.” 429 U. at 463 S., n. These decisions against counsel nice determinations political regarding leverage of this group or and es- that tablish the simple fundamental proposition but that the Fed- eral Government is to of protection entitled the full measure payment Montana has political authorized of state funds to local entities in g., certain contexts. E. Mont. Rev. Ann. 50-1802 Codes to §§ (Supp. 1977) (funding highway improvements 50-1810 for certain expansion, due development); of services 1977) coal (Supp. 11-1834 § (state payments municipalities police departments); with § 1977) (Supp. (state payments municipalities department with fire relief associations). similarly constit- situated state inclusion all derivable subject to the tax. the class uents in private-sector at oral argument Appellants suggested of all relatively percentage small contracting comprises private- argue exclusion in the State contracting receipts gross ambit of the contractors from the sector seriously do not contend appellants But therefore excusable. minimis, nor contracting Montana de private-sector support in the record.5 Private find would such assertion provide subjected if would contracting parties, tax, to this protection of the state tax- significant additional abuse power. private sector from the ing Exempting accordingly contrary receipts tax was to the Constitution. three-judge As I reached properly believe court dissent from claim, decided merits the Government’s judgment below. reversal *22 indicates, anything, private-sector contracting is The record if 108-109, 166-167, 179,
nonnegligible. App. also Bureau See See Census, 39-4, 39-2, Industries 1972 Census Construction